food seurity situation in the kyrgyz repuli...kyrgyzstan is the depreciation of the national...
TRANSCRIPT
FOOD SECURITY SITUATION IN THE KYRGYZ REPUBLIC
The health crisis, caused by the COVID-19
outbreak, has led to a profound economic
crisis in the Kyrgyz Republic, as the country
sees its economy slow down and its budgetary
expenses rise. Adding to the already fragile
situation caused by the pandemic, the recent
political crisis and the resulting instability have
led to even more uncertain prospects. The
resultant negative socio-economic shocks are
having severe consequences on food security.
DECREASES IN HOUSEHOLD INCOME
THREATEN ACCESS TO NUTRITIOUS FOOD -
MACRO ANALYSIS
According to the National Statistics Committee
(NSC), in 2020 the Kyrgyz Republic’s GDP
amounted to 598.3 billion Kyrgyz soms (KGS),
a decrease of 8.6% compared to 20191.
Negative trends were observed in the
construction, wholesale and retail trade
sectors.
As elsewhere, the contraction in economic
growth has led to a decline in the population’s
income -experienced by 54% of households2 -
and to an increase in the unemployment rate,
leaving a large number of people unemployed
and without sources of income. A recent
assessment on the impact of COVID-19 shows
that unemployment may be more severe than
predicted as 22% of households reported that
at least one member had lost his/her job3.
Using these results, the minimum number of
newly unemployed could be estimated around
344,200 people or 13.3% of economically
active population4. Adding to the 140,900
people (5.5% of economically active
population) who were unemployed prior to
the crisis, assuming they had not found
employment in the meantime, the estimated
minimum unemployment rate reaches 18.8%.
FEBRUARY 2021
Photo: WFP/ Danil Usmanov
Given the high share of informal employment (73.8% in
2018, ILO5), the situation is particularly severe for those
“invisible” to the formal employment systems, by large,
urban and semi-urban populations. With the lost
livelihood opportunities, these people are now required
to become visible to the institutions in order to have the
possibility of access to the social assistance system.
In 2018, more than 740,000 Kyrgyz citizens were
registered as migrants in different countries, with Russia
alone absorbing over 86% of all Kyrgyz migrants6. Due to
the COVID-19 crisis, about two-thirds of migrants (63%)
have reported losing their jobs. As unemployment is
becoming an issue all over the world, both migrants
remaining abroad and returning home are at risk of
becoming food insecure7. The assessment showed that
most migrants are willing to return back to Kyrgyzstan to
look for jobs or open their own businesses to help boost
the economy and development of the country. The surge
of migrants returning could lead to an increase in
unemployment and further limit access to basic
resources, including food as they compete with the local
population for income-generating opportunities. This
puts additional pressure on the government to deal with
unemployment and those in need of social protection,
especially in rural areas.
Apart from representing about 30% of the country’s
GDP, remittances are a primary source of income for
many households and in 2019, they contributed to
reducing the national poverty rate by 11 percentage
points indicating that 715,000 people rely on them to
remain out of poverty8. As a result of the pandemic, in
Central Asia, 83% of migrants either lost or had a
reduction in their usual income and, among those who
have lost their jobs, 90.2% were unable to transfer
money to their homeland9. Although a significant
decrease in remittances was forecasted compared to last
year, official statistics from the NBKR showed only a
minor decrease in the inflow of remittances (-1.63%) and
even a marginal increase (+1.2%) when the net inflow
was considered, due to a considerable decrease in
outflows. Most likely, with travel restrictions,
remittances that were sent ‘informally’ before are now
sent through formal channels or money transfers,
hindering the ability of official statistics to capture the
real impact of the pandemic on remittances. A recent
assessment showed that a decrease in volume was
experienced by 85% of family receiving remittances from
a family member abroad10. Therefore, although not
quantifiable, we could assume a sizeable drop in
remittances in 2020. Together with rising
unemployment and the reduced purchasing power due
to higher prices, the reduction or loss of remittances’
income not only jeopardizes the food security of
vulnerable households, but also increases their risk of
falling into poverty.
Rising food prices are impairing access to food – as the
main staples like wheat and flour have increased by 25-
30% in price compared to 2019. This trend is confirmed
by the Consumer Price Index (CPI) which on average has
increased by 17.3% for cereals, meat, fish, milk and dairy
products, fruits and vegetables. Recent simulations by
the World Bank indicate that a 5% increase in consumer
prices alone can increase the national poverty level by
3.6 percentage points.
Source: WB, NSC and author’s calculation
Graph 1: Gross Domestic Product & Unemployment rate (%, 2007 – 2020)
Apart from the reduced availability of food and higher
prices, during the lean season access to food is also
hindered for 20.4% of the economically active
population that derive their livelihood from agriculture
(WB, 2020) as they face lower income having invested in
sowing but earning a profit only after the harvest is sold.
Therefore, it is particularly crucial to keep monitoring the
food security and nutrition situation in the country
during the lean season in order to promptly address
critical situations.
One of the main drivers of the food price surge in
Kyrgyzstan is the depreciation of the national currency
owing to the country’s high reliance on imported food -
around 47% for wheat11, 37% sugar and 84% for
vegetable oil. Notwithstanding that the National Bank of
the Kyrgyz Republic (NBKR) has already sold USD 379.5
million in foreign exchange reserves since March, by
February 2021 the Kyrgyz som depreciated by 21.2% vis-
a-vis the US dollar compared to last year (pre-COVID
estimate), after a prolonged period of stability. At the
end of December 2020, reserves amounted to USD 2.81
billion – USD 136.1 million less than two months earlier.
Coupled with the shrinking of the economy, higher
expenses to counter the crisis have widened the budget
deficit run by the national government, which now
amounts to KGS 29.76 billion (USD 360 million), 5.1% of
GDP12. A deficit will also be carried into 2021, amounting
to KGS 8.4 billion (USD 10.1 million) or 1.3% of GDP13.
The tightening of the overall budget may have
repercussions on the availability of funds for enhancing
social protection schemes to cover the ‘new poor’. From
January to November 2020, due to the economic crisis,
the number of poverty benefit recipients (“ui-buloogo
komok” allowance) has increased by 7%, from 96,080 to
102,504 households with children14. As a ‘shock-
response’ support, in addition to already existing social
protection programmes, one-off food assistance to poor
families, people with disabilities, newly poor and
unemployed was provided. Families needing food
assistance had to call via an ad hoc hotline. Since the
beginning of the pandemic, 683,295 people have applied
for food assistance to the Ministry of Labour and Social
Development, which has been able to accommodate
523,880 applicants thus far15.
Loss of income sources or a decrease in volume,
enhances households’ vulnerability as they are likely to
adopt negative coping strategies. According to the latest
impact assessment on COVID-19, as a result of economic
hardships, 44% of households have cut food costs by
decreasing their food consumption and/or by moving
towards less expensive but less nutritious food options.
This behavior is detrimental to further development,
perpetuating the cycle of poverty. Moreover, through a
rapid assessment conducted by WFP in May, 82% of
respondents compared to 58% in 2019 have already
applied some form of asset depletion coping strategy.
This indicates a reduced ability of households to deal
with shocks, a reduction in current and future
productivity, and human capital formation.
Source: WB and NSC
Graph 2: CPI trend (% of food and non-food items & % of staple food items, 2007-2020)
Photo: WFP/ Dilshod Ismonaliev
ADDING FUEL TO THE FLAMES: POLITICAL
INSTABILITY AFTER OCTOBER’S PARLIAMENTARY
ELECTIONS
The political unrest in October was an additional strain
on the country’s economy costing over USD 100 million,
including the damage caused by the looting of large
companies, according to preliminary estimates of the
International Business Council of Kyrgyzstan. The
unrest negatively affected the investment climate in the
country, weakening investors’ confidence thus
influencing investment, including foreign direct
investment (FDI). Within just the week following the
elections, the Kyrgyz som lost 3% of its value, impacting
food prices.
The political instability also delayed the approval
between Kyrgyzstan and Russia of an indicative balance
that determines the volumes of duty-free deliveries of
fuels and lubricants. Kyrgyzstan relies on oil and gas
imports, mainly from Russia and Kazakhstan, for more
than half of its energy needs particularly during the
winter months when hydropower production is low
(IEA). The agreement was strongly requested by oil
traders who had warned the Government that available
volumes would not have been enough to last until the
end of the year16.
Political instability is likely to further disrupt the ability
of people to have access to food. For a long-term
perspective, it may also affect the availability of food in
the markets, seriously undermining the food security and
nutrition situation in the country.
WORSENING AN ALREADY FRAGILE SITUATION
Poverty: Around 20% or 1.2 million of Kyrgyz citizens
lived on less than USD 1.2 a day17 (KGS 2,748 per capita
per month) in 2019 (NSC), with a high concentration of
the population living just above the national poverty line.
In total, 0.5% of the population lived in extreme poverty,
earning less than USD 0.65 a day (KGS 1,476 per capita
per month). As a result of the pandemic, Kyrgyzstan’s
poor population is projected to increase by another 10%,
resulting in about 1.9 million poor people in the
country18.
Food Security: Household living below the poverty line
spend on average 70% of their income—80 cents, if they
earn USD 1.2 per day—to cover their basic food needs,
according to the World Bank19. The share of income
spent on food is an indicator of food security as the
poorer and more vulnerable a household, the larger the
share of household income spent on food and the
higher the vulnerability to fluctuation in prices on both
the quality and quantity of household food
consumption. A high share of income spent on food
leaves households little room for other expenses like
education and health services, hindering their ability to
graduate out of poverty. In 2019, it was estimated that
46% of the population consumed less than 2,100 kcal per
day20, implying that the poor (and those just above the
poverty line) do not meet their daily adequate energy
consumption.
The situation is more dramatic in regard to a nutritious
diet as up to 76% of households could not afford a
nutrient adequate diet prior to the crisis21 (SOFI, 2020).
In the Kyrgyz Republic, dietary patterns are characterized
by a high consumption of wheat, potatoes and sugar,
undermining the nutritional status of individuals.
Consumption levels of nutrient dense food, such as
meat, milk and their products have substantially
decreased compared to 1990, while consumption of
wheat and wheat products have remained unchanged
during the same period. An adequate diet is vital for all-
round growth and development, which ultimately leads
to an improved quality of life, the graduation out of
poverty, and the ability to break the poverty cycle. In
2020, the World Bank estimated that 40% of the
productivity of the next generation of workers is already
lost relative to the benchmark of complete education
and full health22.
Households that live above the national poverty line but
below the minimum subsistence level23 (53% of
population according to calculations (KIHS 2018)) are at
risk of becoming the ‘new poor’ if they are unable to
recover from the current crisis. A considerable share of
the population falls into the ‘vulnerable’ category as, in
2020, the minimum subsistence level was almost twice
as high as the threshold of the national poverty line,
reaching USD 2.3124 a day (KGS 5,358.53 per capita per
month) of which USD 1.5 a day (KGS 3,483.06 per capita
per month) only to cover food products25. The amount of
minimum subsistence level has grown by 11.5%
compared to last year, in line with the rise in inflation.
A CONCERNING WAY FORWARD
1) Gloomy forecasts for 2021: Inflation & Food prices
The health, economic and social crisis led by the COVID-
19 will have profound repercussions in 2021.The NBKR
forecasts that in 2021 the average inflation rate is
expected to be around 6.5-6.8%, as prices for almost all
types of goods are continuing to rise. The following are
among the factors that are likely to affect food prices in
2021:
• Given its deep integration in regional trade, events
in the main partner countries of the EAEU, Russia
and Kazakhstan in particular, have a chain reaction
in the economy of the Kyrgyz Republic. Thus,
unpredictable policies from larger neighboring
countries could cause price shocks. For example, as
Kazakhstan is a main exporter of wheat in the
region and the Kyrgyz Republic a net importer of
both wheat and wheat flour26, a key risk for both
Kyrgyzstan and the region as a whole could be the
possible introduction of more stringent tariff and
non-tariff regulation measures by Kazakhstan27 also
to the EAEU countries. If introduced, these
measures will likely increase the price of wheat,
with dire consequences on the food security of the
population of the Kyrgyz Republic for which wheat
is the main staple. Russia, one of the world's largest
wheat exporters, has imposed an export quota
limiting the export of grains (including wheat, corn,
rye, and barley) to 17.5 million mt and an export tax
on wheat of USD 30.32 per mt from 15 February to
30 June 2021 to non-EAEU countries28. This has
been done in an attempt to stabilize domestic food
prices. In case this leads to increased grain supplies
to EAEU countries, these actions could have a
positive effect on stabilizing the price of grains,
including in the Kyrgyz Republic.
• The exchange rate, affected by trade flows and
foreign currency inflows. If the national currency
continues to depreciate, all food and consumer
goods that Kyrgyzstan imports will rise in price.
• Another factor influencing food prices in Kyrgyzstan
is the cost of fuel. Despite the fact that the Kyrgyz
som is not directly related to the oil market, it has
reacted to the decline in oil quotes due to its
sensitivity to regional dynamics. With a large share
of migrants living in Russia (and remittances
amounting to 30% of GDP), the economy of the
Kyrgyz Republic is influenced by the economic
growth in the Russian economy. Since the
beginning of 2020, crude oil prices slumped
dramatically following the ‘Russia–Saudi Arabia oil
price war’ in March 2020 and the decline in
consumer demand with the spread of the COVID-19
pandemic, further impacting the global economy.
The reaction of the Kyrgyz economy to decreasing
oil prices could be due to the fact that oil accounts
for over 30% of Russia’s gross domestic product and
over 60% of its exports29. Between January and July
2020, Russia earned 37.7% less from oil exports
than the previous year30. Although since mid-
November 2020 oil prices have experienced slight
increases as the hope for the development of
successful coronavirus vaccinations spread, demand
is not expected to fully recover before 2022.
• Moreover, the food sector in general is likely to
face increased production and distribution costs
associated with compliance to COVID-19 prevention
measures31.
2) Impact of new COVID-19 strain & Vaccination Plan
A new, more contagious strain of coronavirus has
emerged and is now spreading in the UK and several
other countries. Although there is no evidence on the
new strain being more deadly, it appears to be up to 70%
more contagious32, according to British health officials,
leading countries to take more stringent measures at
borders, and sanitary and epidemiological controls have
been strengthened, including at the borders of the
Kyrgyz Republic.
As of 20 January 2021, the total number of cases of
COVID-19 in the country amounted to 83,430 with 1,392
casualties33. A second spike in cases would have a
tremendous impact on the already-fragile economy.
Considering how the economy had shrunk during the
first wave, although now more prepared, the country will
have to undergo significant expenditures to enhance its
health services.
The Ministry of Health (MoH) of the Kyrgyz Republic has
developed a National Plan for the deployment of
vaccinations against COVID-19 in three stages, which was
submitted it to the Ministry of Finance. The first stage is
expected to cover high risk groups (less than 3% of the
population), including medical workers, health
professionals in long-term care facilities, vaccinators and
teachers.
The second stage will be carried out using vaccines
received under the COVAX program for the elderly (aged
60 and over), people with clinical risk factors and the
socially vulnerable. The COVAX programme is predicted
to reach more than 1.3 million people in the period from
June to July 2021. The third stage of vaccinations will
continue at the expense of the state and donor
organizations for the remaining populations34.
3) Credit Line Disruptions & Impact on MSMEs
After a preliminary analysis conducted in March 2020,
the IMF decided to provide emergency support to the
Kyrgyz Republic amounting to USD 242 million given the
magnitude of the expected financing gap (USD 500
million)35. With this emergency support, the IMF aimed
also to catalyze other donors’ support to fill the financing
gap. In July, the World Bank approved a financial package
of USD 121 million to help mitigate the unprecedented
health, economic, and social challenges caused by the
COVID-19 pandemic36. In August 2020, the Eurasian Fund
for Stabilization and Development (EFSD) decided to
provide Kyrgyzstan with a USD 100 million loan.
The widespread concern among donors about the
legality of the October political events, calling the new
government to uphold the Kyrgyz Constitution and the
rule of law, influenced the continuation of aid
disbursement. Russia had suspended the provision of any
financial support to the Kyrgyz Republic until the political
situation in the country stabilized37. Unfortunately, the
EFSD loan was cancelled as the availability period for
disbursement expired on 31 December 2020. As the loan
is not transferable to 2021, the Kyrgyz Republic will have
to undergo the application process again. This is likely to
have repercussions on the national budget estimates for
2021 approved by the Parliament, including the expected
budget deficit.
The resilience of the financial sectors has been
jeopardized by the economic disruption caused by COVID
-19 and the additional instability had a further impact on
credit lines and their solvency, thus exacerbating the
already increased vulnerability of MSMEs (micro, small
and medium enterprises). As a result of the economic
recession caused by the pandemic, in 2020 the number
of enterprises present in Kyrgyzstan has decreased by
29% compared to 2019 (NSC, 2020).
4) Climate Change impacts on the agriculture sector & Exposure to natural disasters
Agriculture is the most climate-sensitive sector, since its
productivity depends on climatic conditions such as
precipitation levels, the seasonal distribution of rainfall
and the moisture content during the growing season.
Over the past five years, anomalies in precipitation from
March-June have impacted the timeline of the planting
season and/or affected lower valley plantings. These
anomalies in climate were observed in the country
throughout 2020 due to climate change and have been
already detected this year as some areas of the country
have experienced below-normal rainfall in January-
February 202138. The stability of the agriculture sector
and produce prices remains at risk in 2021 as below-
normal rainfalls with above-normal temperatures are
predicted for Kyrgyzstan during March-July 2021 (due to
the impact of La Niña cilmate pattern)39.
Graph 3: Rainfall anomalies - ratio between rainfall for the current year and the long-term average
Graph 4: Average rainfall and rainfall predicted levels based on historical observations
Source: WFP’s Seasonal Monitor for 2020
Kyrgyzstan is a disaster-prone country. The Ministry of
Emergency Situations of the Kyrgyz Republic (MoES) lists
20 main natural hazards and processes, including hydro-
meteorological, geo-physical and biological hazards such
as avalanches, droughts, floods, glacial lake outburst
floods, earthquakes, landslides and mudslides,
epidemics, pests, crop diseases and river erosion. Some
of these hazards (e.g., floods, landslides and mudflows)
are predominantly seasonal and occur during spring. The
scale and frequency of natural disasters associated with
climate change increased by 1.5 times over the last
twelve years, which make up 39 percent of all disasters,
causing major destruction and leading to the loss of lives
and livelihoods. In 2019, the direct loss from natural
disasters amounted to KGS 323 billion as material
damage to the economy of the country. The records
show that major floods have occurred between the
months of April and May, with Batken, Osh and Jalal-
Abad provinces being the most exposed. When
confronted with natural disasters and socio-economic
shocks, household-level food security is compromised as
crops and livelihoods and assets are destroyed or
damaged and purchasing power is diminished.
CONCLUSION
The COVID-19 related negative shocks are having
particularly dire consequences on the food security
situation in the country. With the economy in sharp
decline, the increase in poverty rates, the rise in staple
food prices and with the lean season approaching, it is
of utmost importance to continue monitoring food
security in the country in order to implement in a timely
manner any necessary mitigation measures. Food
security and social protection systems are critical
elements in ensuring the country’s stability.
As it is widely known, the lack of access to food may
affect the level of confidence that the people have in the
Government, sparking unrest and disrupting the political
order in the country. Among other specific driving
factors, the last three revolutions were unsurprisingly
proceeded by periods of economic downturn, in
particular rising unemployment levels, and growing
discontent over the uneven and unjust distribution of
material resources and wealth within the nation.
For additional information on the WFP Kyrgyzstan Food Security updates or for the Food Price Monitoring Bulletins, please contact Elisabetta D’Amico, Economic Analyst, [email protected]
Photo: WFP/ Photo Gallery
1. According to the Ministry of Finance (MoF), in 2020 GDP
amounted to KGS 583.2 billion, -5.3% compared to 2019. http://
minfin.gov.kg/ru/novosti/novosti/kyrgyz-respublikasynyn-2020-
zhylga-respublikalyk-b7015
2. NSC, 2020. On the results of the sample survey "Impact of the
COVID-19 pandemic on households"
3. Ibid.
4. Using average HH size of 4.23 (meaning that for every 3 families
of 4 members, one has 5; KIHS, 2018), economically active
population of 2,583,600 and total population of 6,618,300
(MLSD, 2020).
5. Informal employment and informal sector as a percent of
employment - Harmonized series (%)
6. IOM & UNICEF, 2020. Rapid Needs Assessment of the Challenges
Facing Migrant Workers and their Families Impacted by the Covid-
19 Outbreak
7. Ibid.
8. http://www.stat.kg/ru/publications/uroven-bednosti-v-
kyrgyzskoj-respublike/
9. Institute for Socio-Political Research of the Russian Academy of
Sciences - MGIMO University, 2020. Influence of the COVID-19
Pandemic on the Position of Migrants and Remittances in Central
Asia
10. IOM & UNICEF, 2020. Rapid Needs Assessment of the
Challenges Facing Migrant Workers and their Families Impacted by
the Covid-19 Outbreak
11. FAO calculations based on average Import Dependency Ratio
from 2015 to 2019.
12. http://minfin.gov.kg/ru/novosti/novosti/kyrgyz-
respublikasynyn-2020-zhylga-respublikalyk-b7015
13. From approved forecasted budget for 2021 http://
minfin.gov.kg/ru/novosti/novosti/utverzhdennyy-byudzhet-2021-
goda
14. Data of Ministry of Labour and Social Development
15. As of January 20, 2021.
16. https://www.akchabar.kg/ru/news/v-kyrgyzstane-ai-95-s-
nachala-goda-podeshevel-na-1482/
17. The National Poverty line of USD 1.2 is calculated using the
average exchange rate in 2019 (not in PPP terms) and it is
comparable to the international poverty line of USD 3.2 PPP
2011, used for low middle-income countries.
18. World Bank, 2020. Kyrgyz Republic Covid-19 Poverty and
Vulnerability Impacts (Preliminary results). This estimate might
be more severe as forecasting models are not able to capture
the real decrease in remittances.
19. Ibid.
20. https://sustainabledevelopment-kyrgyzstan.github.io/2-1-1/
21. The nutrient adequate diet includes, per person, the average
energy needs and the recommended intake for protein, fat, four
minerals and nine vitamins.
22. HCI equals 0.6
23. The National Poverty line is empirically derived based on actual
consumption while the Minimum Subsistence Level is based on
market prices and physiological requirements as defined by the
Ministry of Health.
24. Considering average exchange rate during 2020
25. http://stat.kg/media/files/9d24bf28-c177-44fd-9bee-
1f9a7c017ceb.PDF
26. According to the NSC, in January-November 2020, the Kyrgyz
Republic imported 50% of wheat and 93% of wheat flour from
Kazakhstan, with the remaining 50% wheat being imported from
Russia.
27. Sergiy Zorya (WB), 2020. Analysis of regional dynamics of
wheat and flour sectors in Central Asia, and their impact on
Uzbekistan
28. WB, 2020. COVID-19 and Food Security (Update 14 January
2021)
29. OECD, 2020. Fossil Fuel Support Country Note, Russian
Federation
30. https://worldcrunch.com/business-finance/what-the-
pandemic-exposes-about-russian-dependence-on-oil
31. OECD, 2020. https://www.oecd.org/coronavirus/policy-
responses/covid-19-and-the-food-and-agriculture-sector-issues-
and-policy-responses-a23f764b/
32. https://ru.sputnik.kg/society/20201225/1050895943/
kyrgyzstan-koronavirus-shtamm-mery.html
33. https://dataviz.vam.wfp.org/Hunger-Analytics-Hub
34. http://med.kg/ru/novosti/3867-vaktsinatsiya-protiv-covid-
19.html
35. https://www.imf.org/en/News/Articles/2020/05/08/pr20213-
kyrgyz-republic-imf-execboard-approves-us-121-1m-emergency
-asst-rfi-rcf-address-covid19
36. https://www.worldbank.org/en/news/press-
release/2020/07/30/kyrgyz-republic-to-mitigate-pandemic-
caused-economic-shocks-for-businesses-vulnerable-people-and-
communities-with-world-bank-support
37. https://www.rbc.ru/
economics/14/10/2020/5f8740519a794747a9369708
38. FAO Estimated precipitation Anomaly- http://www.fao.org/
giews/earthobservation/country/index.jsp?
lang=en&type=31&code=KGZ
39. https://iri.columbia.edu/our-expertise/climate/forecasts/
seasonal-climate-forecasts/
DATA SOURCES AND METHODOLOGY